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Germany's RWE may double LNG derivatives trades this year

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LNG Industry,

Reuters are reporting that Germany’s RWE Supply & Trading may double or triple its trades of LNG derivatives this year from 2017 as it manages price risk for its physical cargoes.

The trading arm of RWE AG, Germany’s biggest power generator and one of the most active utilities involved in trading, buys coal, LNG and oil products globally, and traded 1.5 million t of LNG derivatives last year.

“We’re probably going to double that number this year or even triple that number this year,” said Javier Moret, the global head of the trading unit’s LNG division.

Asia’s potential shift away from oil-linked prices and a need to manage risk for the company’s physical cargoes will boost the financial trades, Moret said at the S&P Global Platts LNG and natural gas markets conference in Singapore.

The company traded 6 million tpy of physical LNG last year, up from 4.5 million t in 2016.

An increase in spot trading in Asia has led to a rise in derivatives volumes in the region.

“The big change we’re seeing at the moment is that demand is more fragmented,” said Moret.

New buyers like Bangladesh, potential demand from Vietnam and the Philippines, and an increase in buyers from China boosts the need for more short-term trading, he said.

Uncertainty in power markets could also boost spot trading, he said.

The trading arm of the Essen-based wholesaler – which acts as the central marketer of RWE’s power station output and manages its global commodities deals – is an active trader in Platts’ Japan-Korea Marker (JKM) derivatives market.

RWE has traded 7 to 10 physical cargoes on the JKM index so far this year, compared with the same volume for all of last year, Moret said.

Platts has been trying to establish its JKM index as Asia’s leading price benchmark for LNG.

LNG swaps volumes, settled against Platts’ JKM LNG price assessments, quadrupled in 2017 to 50 266 lots. That is equivalent to around 170 tankers of LNG, and the growth has continued this year, Platts has said.

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